Thursday, independent oil refiner Tesoro Corp. (TSO) reported a profit for the fourth quarter compared to a loss last year, boosted by higher refining margins and strong retail results, despite a sharp drop in quarterly revenues. The results were positively impacted by better capture rates as enhanced crude flexibility provided increased opportunities to purchase crude oil at discounts to regional benchmarks. Adjusted earnings per share for the quarter topped analysts' expectations.
In a statement, chairman, president and chief executive officer, Bruce Smith said, "While falling commodity prices did benefit our wholesale and retail marketing channels, the capital and non-capital initiatives we implemented beginning in early 2008 have enhanced our ability to deliver substantial and sustainable improvements in our capture of the available margin, and I am pleased to see these successful efforts reflected in our fourth quarter results."
Fourth Quarter Results
The San Antonio, Texas-based company reported net income of $97 million or $0.70 per share for the fourth quarter, compared to a net loss of $40 million or $0.29 per share in the prior-year quarter.
The results of the latest quarter include an after-tax charge of $47 million or $0.41 per share related to write-off of a receivable. This was partially offset by $17 million or $0.12 per share of after-tax accrual reversal following a reduction in estimated costs associated with asset retirement obligations.
Excluding special items, Tesoro reported a net income of $137 million or $0.99 per share for the latest fourth quarter. On average, sixteen analysts polled by Thomson Reuters expected the company to earn $0.91 per share for the fourth quarter. Analysts' estimates typically exclude special items.
According to the fourth quarter guidance issued on January 14, the company expected earnings in a range of $89 to $104 per share, excluding net one-time adjustments of about $0.29 per share.
Revenue for the quarter plunged to $4.33 billion from $6.53 billion in the same quarter last year. Analysts had a consensus revenue estimate of $5.78 billion for the fourth quarter.
Among Tesoro's peers, bigger rival Irving, Texas-based Exxon Mobil Corp. (XOM) reported in late January a decline in fourth-quarter profit to $7.82 billion or $1.55 per share from $11.66 billion or $2.13 per share in the prior-year quarter, owing to weaker crude oil prices, higher operating expenses, lower chemical volumes and the impact of the Gulf Coast hurricanes. Quarterly revenues and other income declined to $84.70 billion from $116.64 billion in the year-ago quarter.
Another peer, San Antonio, Texas-based Valero Energy Corp. (VLO) reported a net loss for the fourth quarter compared to a profit last year, hurt by a non-cash goodwill impairment loss. Excluding the impairment loss, the company's net income increased from the year-ago, and exceeded the analysts' expectations. Quarterly operating revenues dropped to $18.57 billion from $28.67 billion in the same quarter of last year.
Other Metrics
Retail segment's operating income for quarter was $51 million, including an impairment of $4 million, compared to operating loss of $1 million in the same quarter last year.
Gross refining margin for the quarter increased 51% to $12.47 per barrel from $8.28 per barrel in the year-ago quarter. Total system throughput was 555 thousand barrels per day or mbpd, down from 639 mbpd in the prior-year quarter, due to the December coker disruption at Los Angeles and unplanned downtime at Anacortes.
Total refined products sales for the quarter fell to $616 million from $684 million in the same quarter last year, while refined product sales margin was $7.88 per barrel, up from $7.27 per barrel in the year-ago quarter.
Operating income for the fourth quarter was $150 million, compared to a operating loss of $49 million in the prior-year quarter. Total Segment operating income climbed to $204 million from $8 million in the year-ago quarter, due to higher gross margins, especially in the Hawaii and California regions, and improved results of the retail segment. This was partially offset by lower throughput rates.
Cost of sales and operating expenses plunged to $3.91 billion from $6.40 billion in the corresponding quarter a year ago. Selling, general and administrative expenses were $147 million, higher than $74 million in the prior-year quarter.
The company reported a foreign currency exchange gain of $20 million in the latest quarter, compared to a loss of $1 million in the year-ago quarter. Income tax provision for the quarter was $47 million, compared to a benefit of $25 million in the same quarter last year.
Tesoro also declared a regular quarterly cash dividend of $0.10 per share, payable on March 16 to shareholders of record as of March 2, 2009. Capital expenditure for the fourth quarter was $178 million, lower than $265 million in the year-ago quarter.
The company ended the fourth quarter with cash and cash equivalents of $20 million, compared to $23 million at the end of the prior-year quarter.
Full-Year Highlights
For fiscal 2008, Tesoro reported net income of $278 million or $2.00 per share, sharply lower than $566 million or $4.06 per share posted in fiscal 2007. Analysts expected the company to report earnings of $1.86 per share for the fiscal year 2008.
Revenues for the full year soared to $28.31 billion from $21.92 billion posted in the previous year. The Street was looking for full-year 2008 revenues of 29.22 billion.
Looking ahead……..
"While the strength in first quarter West Coast margins has been a pleasant surprise, we plan to continue to follow our 2009 business plan which is based on industry benchmark margins that are lower than 2008, and our expectation that we will realize continued improvement in margin capture," Smith added.
The company also noted that it currently expect fiscal 2009 capital expenditures, including turnarounds to be about $600 million.
Stock Quote
TSO closed Thursday's regular trading session at $16.20, down $0.56 or 3.34% on a volume of 9.70 million shares, higher than the three-month average volume of 8.06 million shares. In the past 52-week period, the stock has been trading in a broad range of $6.71 to $42.20.
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June 05, 2026 16:18 ET A busy week for economic news flow saw a slew of reports being released that reflected the trends in the U.S. labor market. In Europe, economic growth and inflation data gained attention as the European Central Bank and Bank of England head for policy session later in the month. In Asia, the monetary policy session of the Indian central bank was in focus as the country, a major oil importer, reels under the pressures of a weaker rupee and rising inflation.